In the debate between Hayek and Keynes, is the answer Marx?

by Ray_North on August 30, 2011

We are, or so the Coalition government tell us, in a terrible situation. The armageddon of economic disintegration is nigh, they say, unless we take drastic action.

The Coalition’s strategy for ‘drastic action’ has been a mix of Thatcher and Hayekism – combining Maggie’s desire to shrink the state and Friedrich’s belief that in times of economic decline, it’s best to simply let ‘nature’ take its course.

Thus far the ‘drastic action’ has done little except silence the international banks and credit agencies who have reduced our interest rates by a fraction and put a thundering halt to any growth we were previously starting to enjoy after the recession of 2008.

We on these pages, believe that there is an alternative to the Coalition’s economic strategy, we are inclined towards Keynesianism. We believe that economies need to be stimulated and that, if carried out progressively the positive social aspects of using public money to stimulate growth can turn the negative effects of recession into a bonus for the nation as a whole – the argument being, of course, that its never a bad thing to repair a school or build a hospital.

But, there are problems with a straightforward Keynesian analysis – first, even though you may stimulate growth, you can’t continue to invest indefinitely and the problem of a cyclical boom and bust and periodic economic downturn starts to raise its ugly head again. Second, although stimulating the economy may be the answer to this economic problem (and we most definitely think it is), it does little to solve the long term problem that mass global consumerism has brought. We have all turned into rampant capitalists, indeed, this is turning into the century of stuff – we all want to consume as much stuff as we can and we are all prepared to borrow as much as we can to get it. Even though, for the next few years, consumer borrowing will plateau, the stuff will not disappear, we will continue to want it and we will become increasingly disappointed if we don’t (surely one of the reasons behind the riots of 2011, and even a factor in the Arab Spring). But it’s not just the fact that our avaricious consumerism has turned us all into greedy selfish monsters, its a hugely contributing factor to the destruction of our environment and planet.

We can’t go on like this. We must stop consuming.

So, how do we curb it? regulate banks – well, yes, ok, but for that to be done successfully, there must be political will to do more than simply tinker with the banks, they must feel the clunking fist of the state. What else? Well, we must change the emphasis of our economy – we must start to produce things that transcend the meaningless ‘stuff’ produced for mass consumption and invest in research to enable us to make and create things that matter. And, we must genuinely embrace the ‘green economy’ that will see us save energy and reduce the production of noxious waste and pollutants.

And that takes more than just warm words and fluffy aspirations – that takes international government’s working together for the common good.

I have never considered myself a Marxist. Indeed, I enjoy ‘stuff’ as much as the next person, and my attempts to help save the environment by reducing my own consumption have been derisory – but, it strikes me that for the changes in our economy to take place, we can’t rely upon the private sector, as the ethos of an organisation designed to make money must, by definition, continue to promote the consumption that has got us into this mess in the first place.

Does the answer therefore lies with the state, and with democratically elected institutions (in particular Europe), taking more control and not less and rather than cow-towing to banks and international conglomerates, bringing them under the control of the people to work for the people? Is it time to take the idea of International Socialism down off the shelf dust it off and give it a bit of an airing?